Does South Africa benefit by moving to renewables?

11 November 2022

It is noted that South Africa's Just Energy Transition Investment plan is an $8.5billion finance package which includes 4% ($330 million) of the funding in grants. The package funded by the European Investment Bank, France, Germany, and the United States each providing about $1bn, the United Kingdom is providing $1.8bn in support, including $1.3bn as a guarantee to the African Development Bank.

What are the implications to the coal industry in SA? Currently 85% of South Africa’s electricity is coal generated and 100,000 jobs depend on the coal industry. With a 34% unemployment rate, the country relies on what the government to gradually phase out coal for power generation without negatively affecting the fiscal welfare of coal mining communities. However, how many jobs (distinguishing between permanent and temporary employment) will be created by the move to renewables?

Regarding the sovereign debt burden currently at 70% debt-to-GDP, it is important to note what the projected revenues are from running the solar and wind plants. The question is how much of these revenues will be directed toward the repayment of the $8.5billion finance package, as well as the operational costs of these non-fossil-based power generation plants to note the expected profitability.

It is therefore important to also note the ownership structures of these renewable energy power plants as well as who the earmarked suppliers of the machinery and infrastructure are for the solar, wind, and green hydrogen plants.

Lastly, the reliability and power generation capacity of the new plants must be outlined, disclosing all limitations and advantages. However, the questions that must be addressed are (i) does South Africa benefit by moving to renewables at this stage considering its wealth in coal and current debt burden among other domestic challenges and (ii), who benefits the most from these transactions between South Africa and the investors?